Income-tax Act,1961
Act No : 43
Section :
Firm dissolved or business discontinued.
189. Firm dissolved or business discontinued (1) Where any business or profession carried on by a firm has been discontinued or where a firm is dissolved, the 5[Assessing] Officer shall ----------------------------------------------------------------------- 2 Prior to the omission, the proviso read as under: "Provided that- (i) the income of the previous year shall, for the purposes of inclusion in the total incomes of the partners, be apportioned between the partners who, in such previous year, were entitled to receive the same; and (ii) when the tax assessed upon a partner cannot be recovered from him, it shall be recovered from the firm as constituted at the time of making the assessment." Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, but reintroduced by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. 3 Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1975. 4 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 5 Substituted for 'Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. ---------------------------------------------------------------------- 1.604 make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum chargeable under any provision of this Act, shall apply, so far as may be, to such assessment. (2) Without prejudice to the generality of the foregoing sub- section,, if the 1[Assessing] Officer or the 2[Deputy Commissioner (Appeals)] 3[or the Commissioner (Appeals)] in the course of any proceeding under this Act in respect of any such firm as is referred to in that sub-section is satisfied that the firm was guilty of any of the acts specified in Chapter XXI, he may impose or direct the imposition of a penalty in accordance with the provisions of that Chapter. (3) Every person who was at the time of such discontinuance or dissolution a partner of the firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable for the amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall apply to any such assessment or imposition of penalty or other sum. 4 [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] (4)Where such discontinuance or dissolution takes place after any proceedings in respect of an assessment year have commenced, the proceedings may be continued against the person referred to in sub- section (3) from the stage at which the proceedings stood at the time of such discontinuance or dissolution, and all the provisions of this Act shall, so far as may be, apply accordingly. (5) Nothing in this section shall affect the provisions of sub- section (6) of section 159. 5[189A. Provisions applicable to past assessments of firms In relation to the assessment of any firm and its partners for the assessment year commencing on the 1st day of April, 1992, or any earlier assessment year, the provisions of this Chapter as they stood immediately before the 1st day of April, 1993, shall continue to apply.] ---------------------------------------------------------------------- 1 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 2 Substituted for "Appellate Assistant Commissioner", ibid. 3 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978. 4 Prior to the omission, the Explanation, as inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975, read as under: "Explanation.-The amount of tax referred to in this sub-section shall also include that part of the share of each partner in the income of the firm before its discontinuance or dissolution which the firm could have retained under sub-section (4) of section 182 but which has not been so retained.' Earlier, the Explanation was omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, but was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. 5 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier, section 189A was inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 but was omitted by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. ---------------------------------------------------------------------- 1.605
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